Money management and financial plans are two very important things that can help set you up for a successful future. Money management incorporates a mix of budgeting, investing, saving, and spending. To help reach your financial goals and manage your money a little better, there are some tips you can follow to get to a more stable place. 

5 Money Management Tips

Check out some of the most helpful tips to follow along your own financial journey.

Understanding Your Current Situation

The first thing you want to do to get a head start on personal finances is to take a step back and look at your current financial situation. You can categorize your spending by recording your monthly income and expenses, but you can also try out apps that automate the process for you such as Mint and PocketGuard. If you don’t feel comfortable using an app, an easy way to track where your money is being spent is through receipts. Beyond the major bills like rent, utilities, and debt payment, receipts will allow you to take a look at your overall spending habits. 

You should also consider meeting with a financial advisor if you want a better way to understand and fix your current financial situation.

Getting a Head Start on Retirement Savings 

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Financial futures are a major worry for many, which can include fears over retirement. The sooner you begin to save, the less anxieties you will have! You can start off by saving a small amount each month, then increasing once you reach more financial security. 

Retirement plan accounts are set up to supplement retirement income from pensions/social security. These types of accounts can include:

• 401(k) plan through your employer: With a 401(k), you can deposit pretax dollars through a regular deduction from your paycheck.
• 403(b) plan. 403(b) plans are employer sponsored like the 401(k) plan. However, 403(b) plans are offered by public schools and organizations that are tax exempt. Contributions to traditional 403(b) plans are tax deferred, so you’re not required to pay taxes on the contributions or earnings until you withdraw money from the account.
• Individual Retirement Account (IRA). A self-direct account not sponsored by an employer. Once you retire and start making withdrawals, the money will be taxed at your regular income tax rate.
• Roth IRA: With a Roth IRA, you may be able to withdraw your money completely tax free during your retirement years.

Paying Off Debt

Paying off debt will not only make it easier for you to manage finances, but you will also face a lot less anxiety over money-related issues. There are two different methods that have been created to try and help those become debt free, these plans include:

• Snowball Method: The snowball method focuses on paying off your smallest balances first. You still make the minimum payments on all of your debts, while using any extra money to pay off your smallest balance at the same time. You can then use the money to pay off the next smallest balance. However, be wary of debts with higher interest rates because they can take a while to pay off.
• Debt Avalanche Method: The debt avalanche method, also known as the highest-interest-rate method, will list your debts based on interest rates from highest to lowest. Money will first go to debts with higher interest rates, then extra funds will be used to continue paying off the items down the list.

Create Your Own Budget

A good way to develop a healthier relationship with money and spending is through budgeting. Budgeting will ensure you have the money you need to pay for things, while also building up your savings at the same time. 

A budgeting worksheet is a good way to devise a plan with steps that include:

• Add up your monthly income: Your salary at your job and any other sources of income like bonuses and tax refunds should be added up. 
• Add up your monthly expenses: Major monthly expenses can include paying bills for housing, food, student loans, and transportation. If a monthly payment isn’t the same, just use the average amount from previous months.
• Subtract your expenses from your income: The amount in this part will be the starting place for your budget. Anything left over is what you can work with when paying down any debt and building up savings.

Stay on Top of Emergency Savings

Even if you feel like you just don’t have any money left to set aside, it’s important to try and have some sort of emergency savings. When an emergency happens, or maybe you’re left out of work, or if your home needs a repair, emergency savings can help you get through those tough times.

Tips to keep in mind to help start up an emergency savings fund can include:

• Set several small savings goals: Rather than shooting for three months worth of costs right away, try for one month. Once you reach that first goal, you’ll get the motivation to keep going and set your goals even higher and higher. Eventually, saving will become second nature for you!
• Automate the savings: Set up an account specifically for your emergency fund. You can have your chosen contribution amount deposited automatically, either by your employer or bank.
• Balancing an emergency fund with other priorities like debt: Make sure that you are balancing the funds that go into your savings with the funds that go towards paying off any debt. While you have to save up some money for emergencies, every day that you’re still in debt is continuing to cost you more money.

You’re not alone in your stress about finances, but following some of these tips/habits can help your current and future financial situation. And of course, put your mind a little bit more at ease!